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MDU vs. ATO: Which Stock Should Value Investors Buy Now?

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Investors looking for stocks in the Utility - Gas Distribution sector might want to consider either MDU Resources (MDU - Free Report) or Atmos Energy (ATO - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

MDU Resources has a Zacks Rank of #2 (Buy), while Atmos Energy has a Zacks Rank of #3 (Hold) right now. This means that MDU's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

MDU currently has a forward P/E ratio of 13.60, while ATO has a forward P/E of 19.79. We also note that MDU has a PEG ratio of 1.97. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ATO currently has a PEG ratio of 2.72.

Another notable valuation metric for MDU is its P/B ratio of 1.68. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, ATO has a P/B of 1.69.

These are just a few of the metrics contributing to MDU's Value grade of B and ATO's Value grade of D.

MDU stands above ATO thanks to its solid earnings outlook, and based on these valuation figures, we also feel that MDU is the superior value option right now.


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Atmos Energy Corporation (ATO) - free report >>

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